Sub-national Differentiation and the Role of the Firm in Optimal International Pricing

Edward Balistreri and James Markusen

No 331370, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: We illuminate the relationship between optimal firm pricing and optimal trade policy by exploring a generalized model that accommodates product differentiation at both the national and sub-national levels. We assume monopolistic competition in the differentiated products at the sub-national level. When the national and sub-national substitution elasticities are similar we find little opportunity for small countries to improve their terms of trade through trade distortions, because firms play an important preemptive role in optimally pricing unique varieties. We contrast this with standard applications of perfect-competition Armington models, which exhibit high optimal tariffs—even for relatively small countries.

Keywords: International Relations/Trade; Agricultural and Food Policy (search for similar items in EconPapers)
Pages: 36
Date: 2005
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Related works:
Journal Article: Sub-national differentiation and the role of the firm in optimal international pricing (2009)
Working Paper: Sub-national Differentiation and the Role of the Firm in Optimal International Pricing (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331370

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